NMDC refused to pay additional levy on iron ore sales from the Donimalai mine. Credit: NMDC Limited.

Indian state-controlled iron ore mining company National Mineral Development (NMDC) has reportedly launched legal action against the southern state of Karnataka to prevent demands for a larger share of revenue from Donimalai mine iron ore sales.

The case will be heard by the Karnataka High Court on 10 January, Reuters reported citing the state’s mining secretary Rajender Kataria.

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As NMDC is refusing to give in to the state demands for a greater share of revenue, the Karnataka government is planning to auction the Donimalai iron ore mine.

Last month, NMDC suspended production after the government imposed an 80% premium on iron ore sales from the mine.

At that time, the government renewed the company’s licence for the Donimalai mine until November 2038. Most of the ore produced at the mine is supplied to Indian steelmaker JSW Steel.

The secretary announced that the state government is considering auctioning the mine next month.

“The suspension of operations at the Donimalai site will lead to a temporary disruption on ore supply and increase prices by 10-15%.”

Kataria told the news agency: “NMDC has approached the High Court for an urgent hearing.”

“We had sent a letter and a reminder last month to NMDC saying if they did not agree to our terms, our recourse will be to auction the mine in January.”

Since the company approached the court, the government will not be able to make a formal decision on auctioning the mine, according to Kataria.

Federation of Indian Mineral Industries (FIMI) South former chairman and member Basant Poddar told business-standard.com that the suspension of operations at the Donimalai site will lead to a temporary disruption on ore supply and increase prices by 10-15%.